Teleflex: The Surgery Was Successful

Mini-conglomerate Teleflex (TFX) has cast off most of its industrial operations and transformed itself into a medical-oriented enterprise, and investors are thrilled. "Since selling its automotive business and acquiring Arrow [medical devices] in October 2007, Teleflex is no longer a slave to swings of the economy. It derives 75% of its operating profits and 60% of sales from its expanded health-care unit," says Robert Olstein, president of Olstein Capital Management, which owns shares. Teleflex continues to supply engine-repair products for the aerospace and marine industries (40% of sales). But its current focus is providing a wide range of medical products, including disposable medical supplies, such as sutures and tools for minimally invasive cardiac surgery, as well as instruments for respiratory care procedures and for treatment of urological conditions. The margins in the medical business, notes Olstein, are much higher than those of its industrial gear, and operating profits are less volatile. Now at 57.31, the stock is worth 90, figures Olstein.

Stuart Benway of Standard & Poor's (MHP), who rates Teleflex a buy, says the company has created a portfolio of businesses offering improved profitability and sustainable growth. The sale of the automotive business, he adds, should increase operating margins and reduce cyclicality. Benway expects earnings of $3.80 a share in 2008 and $4.30 in 2009.

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